Government ready to issue new bonds

Government ready to issue new bonds

The Jakarta Post, Jakarta

The government is on track to issue a huge amount of treasury
bonds later this month as the preparations are nearing
completion, a senior finance ministry official said.

Fuad Rachmany, head of the state bonds management center -- a
body under the finance ministry, told reporters on Wednesday that
what was left to be completed at the moment were just technical
matters.

"What is left to complete is just a matter of the technical
issues of around 20 percent to 30 percent. We will execute the
plans very soon," Fuad said.

The House of Representatives has approved the government's
plan to issue a total of Rp 7.7 trillion (about US$845 million)
worth of bonds this year to help refinance maturing domestic
government debt.

The government intends to issue both treasury bonds (longer
maturity bonds) and treasury bills (shorter maturity bonds). But
it has yet to decide how many T-bonds or T-bills should be
issued.

Fuad only said that the government would first issue the T-
bonds, but the amount had yet to be decided.

Late last year, the government issued some Rp 2 trillion worth
of T-bonds with the issue being oversubscribed, indicating strong
investor interest in the government bonds.

Reaffirming Fuad's statement, Bank Indonesia said also that it
expected to issue a ruling on the bond issues next week, which
would set out the guidelines for the procedures and mechanisms
involved.

"I think the ruling can be issued next Monday or Tuesday,"
Tarmiden Sitorus, the central bank's monetary management division
director, told reporters, while refusing to state the exact
amount of bonds to be issued in the first tranch, saying that
this was still under discussion.

Despite claims by analysts that issuing new bonds would only
temporarily shift the country's debt problems, the government has
chosen to take such action as part of its strategy to manage its
huge public debt.

Without refinancing, the government will risk sending the
country into a fiscal disaster.

As of December last year, the country's domestic debts stood
at Rp 650.4 trillion -- all in the form of bonds, with a large
chunk of them maturing between 2004 and 2009.

Of the total domestic debts, local banks held most of them
with some Rp 430 trillion worth of recap bonds, while Bank
Indonesia received another Rp 144 trillion in bonds to replace an
equal amount it had spent in providing liquidity supports loans
(BLBI).